Robert Allan and Son - Rutherfurd v. Alexander Turnbull for the Edinburgh and Leith Glass Company - Attorney General (Campbell) [1834] UKHL 7_WS_281

UKHL
Robert Allan and Son - Rutherfurd v. Alexander Turnbull for the Edinburgh and Leith Glass Company - Attorney General (Campbell)
[1834] UKHL 7_WS_281 · 1834-04-08
A partner of a joint stock company assigned to bankers certain shares of the company ex facie absolutely, and they intimated the assignation to the company: Held, in a question with the company, (affirming the judgment of the Court of Session,) that the bankers, as assignees, were liable as partners; and that it was not relevant to free them from this liability to allege that the assignation was granted in security of payment of debt, and that certain forms prescribed by the contract of partnership as to transferring shares had not been observed.Mr. James Stuart of Dunearn held 150 shares of the capital stock of the company called the Edinburgh and Leith Glass Company, formed in 1824, and on which, prior to April 1828, he had paid three instalments, under calls made by the Directors. On the 12th of that month he executed, in favour of the appellants, Robert Allan and Son, bankers in Edinburgh, an ex facie absolute assignation of 100 of his shares, in these terms:—Alexander Wight, Esq., bankers in Edinburgh, individual partners of the company carrying on business under the firm of Robert Allan and Son, bankers in Edinburgh, and to the survivor of them, and the heirs of such survivor, in trust for behoof of themselves and such other person or persons as may be for the time sole partner or the partners of the said company or firm of Robert Allan and Son (under whatever name, title, or firm they may be for the time known), and to the assignees or disponees of the said trustees or survivor of them, 2,000 l . of the capital stock of the Edinburgh and Leith Glass Company, which belong to me, and are entered in my name in the books of the said Edinburgh and Leith Glass Company, with the whole profits and dividends that now are or may hereafter become due upon the said capital stock of the said company; with full power to the said trustees, or survivor of them, or their or his foresaids, to procure the same transferred to their or his own names or name in the books of the said company; and also to uplift, discharge, and convey the same, and the profits and dividends arising therefrom, in the same manner as I might have done before granting hereof, or as the other proprietors of the said company are entitled to do by their contract of copartnery; and I oblige myself to warrant this assignation from all facts and deeds done or to be done by me in prejudice hereof. In witness whereof,”
“I, James Stuart, Esq., of Dunearn, hereby assign, transfer, and make over to and in favour of Thomas Allan, Esq., of Lauriston, and

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&c.This assignation was qualified by a back bond granted to Mr. Stuart, whereby it was declared, by Allan and Son, to have been made in security of the debts owing by Mr. Stuart to them, and they became

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By the deed of copartnery it was provided, inter alia:—

of by them, in the same manner as was necessary with regard to the first offer. or transfer, and have testified the entry of such copy or memorial on the said deed of conveyance, for which a fee of 2 s. 6 d. per share on the amount of stock transferred, or such other commission as the ordinary directors may fix, shall be paid by the purchaser or assignee, to be applied for the benefit of the company as the ordinary directors may think fit; and the officer so appointed is hereby required to make such entry of such copy or memorial or specification, and grant such certificate thereof, without any undue delay. more share or shares in the said undertaking, whether as subscribers, or as successors, executors, administrators, or assignees of subscribers, shall be deemed and taken to be the proprietors of the several shares standing in the said book in their respective names, and shall be subject and liable to the payment of every call or calls made and to be made thereon, and to all actions, suits, forfeitures, and penalties to which original proprietors of shares in the said undertaking are made subject and liable by this contract; and that all notices hereby required to be given shall be given to the party appearing by the said register book of the said company to be such proprietor or proprietors, or their representatives, or left at his, her, or their last or most usual place of abode, and shall be in all respects good, sufficient, and conclusive; and all payments of interest and dividends due and to become due on such shares shall be made to such persons as by the said books of the said company shall so appear to be a proprietor or proprietors thereof; .and that no assignment, transfer, conveyance, or sale of any share or shares, or other instrument giving title to any share or shares, which shall not have been enrolled or registered as directed by this contract, shall be admitted as evidence, either to defeat any action or suit brought or to be brought by the said company of proprietors to recover the said calls, or to entitle any person to recover any share or shares forfeited to the said company of proprietors, or to make the said company of proprietors liable in the payment of dividends, or to found any other claim whatever against the said company, or to any other person than such as appear from the said book to be proprietors of the said shares; but that in all cases the said book shall be considered as sufficient and conclusive evidence of the proprietorship of the said shares, declaring that until each respective proprietor shall have been enrolled as such for the space of at least fourteen days he shall have no right to vote, or attend at any meeting of the company of proprietors, or otherwise interfere in the business thereof.”
“9. That the partners shall be at liberty to sell and dispose of the whole or any number of the shares held by them, and that either gratuitously or for any onerous consideration, inter vivos or mortis causa. But declaring always, that in case of sale or conveyance inter vivos, for an onerous consideration, an offer of the share or shares shall be first made in writing to the ordinary directors for behoof of the company; which offer the ordinary directors shall have full power to accept in manner after mentioned, and three lawful days shall be allowed them to consider of the same; and if such offer shall be declined or not accepted of by the ordinary directors within the said period of three days, then and after the lapse thereof the partner making the offer shall be entitled to make a sale or sales of such shares to any person or persons he thinks proper, at or above the price demanded for the same from the company, but he shall not be entitled to make such sale to any person at a lower price, until a new written offer at such lower price shall first have been made to the ordinary directors, and declined or not accepted

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12. That where the share or shares of any partner are transferred, conveyed, or sold in terms of the above articles, and that either by the partners or ordinary directors, the assignation thereof shall be in the following terms:—
“I, A.B., in consideration of paid to me by C.D., do hereby sell, assign, convey, transfer, and make over to and in favour of the said C.D. the sum of capital stock of and in the Edinburgh and Leith Glass Company, being one share (or so many shares, as the case may be, numbers) in the said undertaking, to be held by the said C.D., his executors, administrators, and assignees, subject to the rules, orders, and restrictions' that I held the same under immediately before the execution thereof; and I, the said C.D., do hereby agree to take and accept the said capital stock, subject to the same rules, orders, restrictions, and conditions. In witness whereof we have subscribed these presents. Written by at the day of before these witnesses.”
And on every such sale the said deed of conveyance, being executed by the seller or sellers, and the purchaser or purchasers of such share or shares, shall be kept by the purchaser or purchasers for his, her, or their security, after the officer of the company appointed by the directors for that purpose shall have entered, in a proper book or books to be kept for that purpose, a copy or memorial or specification of such sale

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14. That the said ordinary directors shall and they are hereby required to cause the names and designations of the several persons who shall be entitled to shares in the said undertaking, with the number of the shares, and also the proper number by which every share shall be distinguished, to be fairly and distinctly entered in a book to be kept in the company's office for the purpose, and after such entry to cause the same to be signed by the chairman, deputy chairman, or any of the ordinary directors, or such officer as they may empower and appoint to do so; and shall also cause a certificate, signed by one of the ordinary directors, or officer so authorized, to be delivered to every proprietor, on demand, specifying the share or shares to which he, she, or they is or are entitled in the said undertaking.15. That the bodies politic, corporate, and collegiate, and all and every person and persons whose names shall at any time hereafter stand in the said register book or list of proprietors of the said company, either as proprietor or proprietors of one or

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On the 7th of August 1828, intimation was made by Allan and Son to the Glass company, under form of notarial instrument, of the assignation in their favour, of which a copy was furnished to the Company, but no communication was made to them as to the existence of the back bond. This intimation was inserted in the company's journal of transfers on the same day on which it was made, and the names of Robert Allan and Son were subsequently entered in the register of stockholders, but not until after the 20th of August, by which time Mr. Stuart had become bankrupt and left the country. None of the other requisites were complied with. Thereafter, certain additional calls were made by the directors, and Allan and Son were required to pay them. For some time they did not positively refuse, or deny their liability, though they avoided any acknowledgment to that effect, but the Glass company ultimately turning out unprosperous, they maintained that they were not partners, and were not subject to any responsibilities as such. The Glass company then raised an action before the Court of Session, concluding to have it declared, “that the said Thomas Allan and Alexander Wight, as trustees foresaid, and the said firm or company of Robert Allan and Son, and the

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Allan and Son pleaded in defence that no effectual transfer had, in terms of the rules of the Company, been made in their favour, and at all events, as it was clearly established that the assignation was granted, not as an absolute transfer, but merely as a right in security, and as they were willing to renounce all right to the shares, they could not be made responsible as partners.The Lord Ordinary, on the 16th of February 1831, decerned in terms of the libel, but found no expenses due, and referred to the case of the East Lothian Bank v. Turnbull , 3d June 1824. * Allan and Son having reclaimed, the Court appointed a hearing in presence by one counsel on each side, and the back bond having not hitherto been produced, they granted diligence for recovery of it. After hearing counsel they ordered the question to be argued in Cases, and thereafter appointed them, with the record, to be laid before the other Judges, and requested their opinions “as to whether the Lord Ordinary's interlocutor ought to be adhered to, or not; and, if not, what alteration ought to be made thereon.” The following opinions were thereupon returned:—

Footnote

* 3 S. & D., 95. (new ed. 63.)

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Lords President , Craigie , Gillies , and Balgray .—“We are of opinion that the Lord Ordinary's interlocutor in this case ought to be adhered to, without any alteration.All the clauses in the contract of copartnery founded on by the defenders, either do not apply to this case, or are clauses solely in favour of the company; which, if the company does not think it necessary to enforce, no other person is entitled to found on.”Lords Medwyn , Corehouse , and Fullerton .—“The shares of the stockholders in the Edinburgh and Leith Glass House Company were assignable, both at common law, and by the express provision of the contract of copartnery. On the 12th of April 1828 Mr. Stuart granted a disposition and assignation, ex facie absolute, of 100 shares of his stock in that company to Allan and Son, the defenders. The assignation was completed by an intimation to the manager on the 7th of August following, and of the same date it was entered in the journal of transfers, kept in terms of the 12th article of the contract. The question has arisen, whether the defenders by that conveyance became shareholders of the company, and as such liable to all the obligations of partners? The Lord Ordinary has decided in the affirmative, and we are of opinion that his interlocutor ought to be adhered to.Messrs. Allan and Son rest their defence on two grounds. They plead, first, that the transfer in reality was not absolute, but granted in security of a sum which they had lent to Mr. Stuart; and, secondly, that in consequence of the nonobservance

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1. With regard to the first plea it may be observed, that the assignation did not bear, either expressly or by implication, that it was granted in security. On the contrary, it imported an absolute transfer of all right that was in the cedent to the shares in question. It is true that the conveyance was qualified by a back bond, by which the defenders consented to re-dispone to Mr. Stuart, if he repaid the debt at or before Martinmas 1828. But that obligation was not communicated to the company for a period of many months after the assignation had been intimated,—after the bankruptcy of Mr. Stuart,—after repeated calls had been made on the defenders for payment of their instalments as partners,—and after it appeared, even by the terms of the back bond itself, that the term of redemption had expired. We are of opinion, therefore, that this latent obligation can have no effect whatever upon the question at issue.2. There are provisions in the contract, that a partner desiring to sell all or any of his shares shall previously make an offer of them to the company, which may be accepted of within three days; that the assignation, when granted, shall contain an obligation, subscribed by the assignee, to hold the shares under the conditions and subject to the rules of the company, and that the transfer shall be recorded in the register of stockholders,—regulations which, it is admitted, were not complied with in this instance. But the company having received intimation of the

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“The decision in the case of the East Lothian Bank against Turnbull, cited by the pursuer, appears to us a precedent, à fortiori, in the present question. In that case it was provided in the contract, that every transfer should be made and accepted in presence of two directors, who should subscribe the deed of acceptance. But the East Lothian Bank, after the transfer had been intimated to them, so far from waiving that provision, gave notice to the purchaser that it was incumbent upon him to attend at the bank, that the ceremony might be performed. Yet the Court, notwithstanding, held that by the intimated assignation the transfer had been completed,—that Turnbull was a partner,—and that the regulation

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If these views be correct it is quite immaterial that, as in a question between the defenders and Stuart, the right to the shares was redeemable. It is admitted in the record, that the defenders did not communicate that condition of the agreement to the pursuers at the date of the intimation; and it is not averred that the pursuers were in the knowledge of the fact. But although they had known it they were bound to receive the defenders as partners, and to enter them as such in the register; for there is no rule of law, or provision in the articles of the copartnery, that a person holding a share subject to a right of redemption shall not be a partner while it remains unredeemed. It is equally immaterial, that the pursuers had the privilege of refusing to acknowledge the defenders as partners till the form of

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“ Lord Moncreiff .—This case appears to me to be attended with very considerable difficulty; and at present I am not satisfied that the interlocutor of the Lord Ordinary is right.
The facts as they appear from the record are few and simple. Allan and Son having in April 1828 advanced a large sum of money to Mr. Stuart, obtained from him a deed of disposition and assignation of 2,000 l . of the capital stock of the glass company, of which he was a partner to that nominal extent. The deed was absolute in form, but qualified by a back bond, which, as between these parties, certainly rendered it, both in fact and law, an assignation in security only. It does not appear on the

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The intimation of the assignment took no notice of the back bond, or of the qualified nature of the right, but it stated the terms of the assignation itself. That deed bore an obligation to execute a regular transference of the shares in terms of the 12th article of the condescendence. It was entered in a book called the Journal of Transfers, of its date the 7th of August; but no entry was made in the register of stockholders, as provided by the 15th article of the contract, till after Mr. Stuart's bankruptcy on the 20th August.After the intimation, the pursuers made a demand of two instalments of stock, amounting to 400 l ., against the defenders; and the record bears, that ‘they have failed to make payment of the same.’ It does not appear from the record at what time these calls were made, or when the back bond was first made known to the pursuers; but all that took place was posterior to the 7th August.In this state of the facts, the question is whether the pursuers are entitled to hold the defenders as partners of the company, to the effect that, whether they make any demand on their assignation other than that expressed in the intimation and protest or

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Unless there were a demand made for investigation and evidence, I must hold it as a fact upon this record, that, whatever may be the effect in regard to the pursuers, the real transaction between Mr. Stuart and the defenders was for an assignation in security only, with a power of redemption. And it is to be observed, that according to the terms of the back bond the defenders were only to be entitled, even after the term of redemption, to hold the shares with a power to sell them by public roup, and to account to Mr. Stuart for the proceeds. There was no price fixed by the assignation; and the back bond referred only to the debt in security of which it was given.This being the nature of the transaction, it is clear that if Mr. Stuart had continued solvent he could never have compelled the defenders to become partners of the glass company in his place; and that the intimation of the assignment could not have had the effect of entitling him to do so.On the other hand, though the assignment was absolute in form, and the intimation took no notice of the back bond, it seems to be equally clear that as no transfer was executed in terms of the contract of copartnery, and for this reason, probably, the names of the defenders were not entered in the register as partners,—neither Mr. Stuart nor the defenders could have compelled the pursuers to receive the defenders as partners, discharging Mr. Stuart of all responsibility, and extinguishing his rights as a

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It appears then,—1. That as between Mr. Stuart and the defenders, the defenders were not partners; 2. That as between Mr. Stuart and the pursuers he was still the partner; and, 3. That as between the pursuers and the defenders, the defenders were not partners, if it had been for the interest of the pursuers to maintain that they were not.But I am of opinion that the transaction could not possibly so stand that both Mr. Stuart and the defenders should be partners of the company, upon the same stock and at the same time. And neither do 1 think it possible to hold, that the pursuers had an option, according as it should suit their interest, to take either Mr. Stuart or the defenders as their partner. And yet, if I do not entirely misapprehend the case, this last is the proposition which the pursuers must make out, in order to support their claim.The case of the East Lothian Bank against Turnbull, 3d June 1824, differs from the present case in the fundamental fact, and must therefore depend on different principles. In that case both the original

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In the present case, if the pursuers were to stand on the actual transaction, they must fail in their demand, unless it could be maintained that the holder of an assignment of a partner's share in a company, in security only, becomes actually a partner of the company, by intimating the assignment. This cannot be maintained; and therefore they must rest their case on very different ground from that on which the East Lothian Bank stood in that case.

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If there were any facts in the case from which it could be inferred that the pursuers were in any respect misled or deceived by the absolute form of the assignation, and that they suffered injury thereby, I should think that they were clearly entitled to redress; but there is no such averment in the record; and it would be a case to be tried in a different manner. I humbly think that the very form and substance of the deed of assignation must have made them aware of the nature of the transaction;—made, as it was, in April, when, from the calls then in cursu, the stock was evidently at a discount,—made without any price stipulated, unless the precise nominal value of the stock were held to be the price,—no transfer having been executed,—no intimation given till the 7th of August, after Mr. Stuart had left Britain, and that intimation containing no demand to be received as partners, but merely a prohibition to pay to other parties, as in the common case of intimation as a diligence. And it is rather to be inferred from the circumstance of the entry in the register not having been made till after the actual bankruptcy of Mr. Stuart, that the pursuers were not, in fact, in any doubt as to the nature of the assignment.The great difficulty, therefore, which I feel in the case is, that as the assignment was, in fact, taken only as a security, and the intimation of it was evidently intended merely to take such security as the shares afforded (whether competent to be so done, or not); and further, as there was not, in fact, any transfer

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At present, therefore, I am inclined to think that the pursuers have failed to establish their claim against the defenders, and that the interlocutor of the Lord Ordinary ought to be altered, and judgment of absolvitor pronounced in favour of the defenders.”

Lord Mackenzie .—“I concur in the above opinion.”

On advising these opinions, the Court, on the 1st of March 1833, adhered to the interlocutor of the Lord Ordinary. *Allan and Son appealed.Appellants .—From the facts of this case, it is clear that the purpose of the transfer was not to divest Mr. Stuart, and to confer an absolute right to the shares in favour of the appellants, but merely to give to them an effectual security for repayment of the money which

Footnote

* 11 S. & D., p. 487.

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Respondent .—Although the present transaction, when fully investigated, turns out to be of the nature of a

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Lord Denman .—My Lords, this case appears to me to resolve itself into points which are of no great difficulty. Mr. Stuart was a member of the Leith Glasshouse Company, under a deed of copartnery which authorized the assignment of shares, and under that deed he made an assignment, in terms as large as language could supply, to the gentlemen who are now the appellants before your Lordships. Those gentlemen intimated

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The House of Lords ordered and adjudged, That the said petition and appeal be and is hereby dismissed this House, and that the interlocutors therein complained of be and the same are hereby affirmed.Solicitors: A. Dobie— George Webster, Solicitors.